Sumitomo Mitsui to Start Brokerage Business in London, New York
Sumitomo Mitsui CEO Teisuke Kitayama
Haruyoshi Yamaguchi/Bloomberg
Sumitomo Mitsui Chief Executive Officer Teisuke Kitayama, seen here, said in the document, “Sumitomo Mitsui and Nikko Cordial’s tie-up is steadily progressing.”
Sumitomo Mitsui Chief Executive Officer Teisuke Kitayama, seen here, said in the document, “Sumitomo Mitsui and Nikko Cordial’s tie-up is steadily progressing.” Photographer: Haruyoshi Yamaguchi/Bloomberg
Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank, plans to start brokerage businesses in London, New York and Hong Kong within the next six months through its Nikko Cordial Securities Inc. unit.
Nikko Cordial aims to set up offices in the three cities to start its brokerage business by March 31, Sumitomo Mitsui Chief Executive Officer Teisuke Kitayama said in presentation material distributed to investors in Tokyo today, a copy of which was obtained by Bloomberg News.
Expanding brokerage operations would help Sumitomo Mitsui fill a gap left after it ended capital alliances with Daiwa Securities Group Inc. and Goldman Sachs Group Inc. The lender bought Nikko Cordial and an investment banking business from Citigroup Inc. for 545 billion yen ($6.5 billion) in October.
“The bank is now on the starting line by setting up the basic overseas franchise after ceasing the capital relationships,” said Takehito Yamanaka, a Tokyo-based analyst at Global FXA Securities Ltd. “We will wait and see whether the bank can actually generate a profit out of the businesses.”
Kitayama spoke today at Bank of America Corp.’s Japan Conference, where 1,400 Japanese and foreign institutional investors gathered. “Sumitomo Mitsui and Nikko Cordial’s tie-up is steadily progressing,” he said in a prepared statement. The event was closed to the media.
Sumitomo Mitsui tripled net income for the first quarter to 211.8 billion yen from a year earlier, partly because Nikko Cordial boosted its profit.
Nikko’s Profit
Tokyo-based Nikko Cordial posted 10.2 billion yen of profit for the three months ended June 30, up from 8.3 billion yen a year ago. Nikko’s trading profit rose to 17.6 billion yen for the quarter from 12.2 billion yen a year earlier.
The brokerage formed an equity research department in August headed by Kenichiro Yoshida, who was hired from Goldman Sachs. Nikko also started equity trading for professional investors last month, according to the presentation material.
Nikko aims to hire 1,000 people, including fresh graduates and experienced workers, during the year ending March 2013 to tap demand for underwriting securities and advising on takeovers, President Eiji Watanabe said in March. Nikko has 6,831 employees as of June 30.
“We are now preparing to establish overseas business,” said Shojiro Hirota, a Tokyo-based spokesman at Nikko Cordial, declining to comment further.
Industry May Shrink
The proposed expansion comes as some analysts predict the worldwide securities industry is set to retrench. Meredith Whitney, the former Oppenheimer & Co. analyst who correctly predicted Citigroup’s dividend cut in 2007, said in a report dated Aug. 31 that firms will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow.
Sumitomo Mitsui ended its capital alliance with Goldman Sachs in January, a month after dissolving its investment banking tie-up with Daiwa Securities.
Nikko closed its London office in 1998 as an alliance with Citigroup gave the Japanese brokerage access to the U.S. lender’s global investment banking franchise.
To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.
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